In May 2007, Milan and Liverpool, two of the greatest soccer clubs, faced off in the Champions League final. Liverpool hasn’t qualified for this year’s edition of the competition, while Milan is a shadow of its former self after selling Zlatan Ibrahimovic and Thiago Silva to Paris Saint-Germain.
Up until about three years ago, soccer had a clear hierarchy. England was dominated by a top four of Liverpool, Manchester United, Arsenal and Chelsea. Italy was run by a big three of Juventus, Milan, and Internazionale. Spain was ruled by a Real Madrid-Barcelona duopoly. And Germany had a Bayern Munich quasi-monopoly.
All 10 teams were more or less on the same level. But now, things have changed. Manchester City and Paris Saint-Germain have become forces to be reckoned after takeovers by Middle Eastern groups. Tottenham Hotspur is a powerhouse in England after two consecutive top-four finishes. Borrussia Dortmund won the Bundesliga twice.
Meanwhile, Liverpool hasn’t appeared in the Champions League since an ignominious 2009 group-stage exit. The club’s next appearance looks well over the horizon. The likes of Arsenal, Internazionale, and Milan no longer look capable of signing top players.
Is the current situation a new status quo, or merely a period of transition?
Governments in the United States and the United Kingdom have reacted to the 2008 financial crisis by further regulating the banking industry in the key hubs of New York and London. Therefore, the availability of loose money and cheap loans is in decline for everybody, including soccer teams.
So a famous club will no longer be able to borrow itself to glory. Manchester United has undoubtedly taken note of this by issuing an IPO in order to reduce debt.
Meanwhile, new financial regulations from UEFA, European soccer’s governing body, ensure that a club cannot spend more than it earns. That includes Paris Saint-Germain. Ibrahimovic did not come for free. Yet PSG didn’t borrow the money. It was given to the club by its owners.
Just as borrowing will inevitably decline, having a generous owner will be of less and less use. Clubs will have to learn to function without help from their owners and without enormous debt.
As it stands, there is a multi-tiered system of dominance in European soccer. Barcelona, Real Madrid, Manchester United and Manchester City are in the best position to win the Champions League this season.
These teams are consistently able to attract the best players. They have squads that not only have quality, but also depth.
Chelsea, Arsenal, Juventus, Borrussia Dortmund, Bayern Munich, Paris Saint-Germain and Milan are outsiders in a race to outdo better established or better funded competitors.
PSG and Chelsea have the cash that Juventus and Milan lack. They should be able to stay ahead on the transfer market until the UEFA financial regulations kick in. Arsenal and Borrussia Dortmund still aren’t destinations for top players.
Tottenham Hotspur, Liverpool, and Internazionale need to work their way to the very top, or reverse their decline. This season, none of these clubs will compete in the Champions League. They must ensure that this is an exception rather than a habit.
Perhaps select groups of dominant clubs will become a thing of the past. If the elite cannot borrow more than other clubs, nor accept more from their owners, they will lose their status. Soccer is on track to become more open and more competitive as financial inequalities fade.